Working with oil and gas investment companies

There are consulting companies that provide professional assistance to people who are looking to invest in oil and gas. These companies provide assistance and training in several “arcane” subjects such as royalty and mineral interests, the nature of leases, surface rights and other specialties.

People who want to make investments in oil and gas by the acquisition of oil and gas properties are strongly advised to work with one or more of these consultancy companies in order to make favorable agreements with landowners, and to stay ahead of the rapidly-changing oil and gas securities laws.  Those companies offer ongoing and as-needed training to investors and their attorneys, agents, accountants or representatives. There are, for example, several seminars specific to this market that are conducted by individuals and organizations, but they are usually too superficial and do not address specific issues, or convey outdated or even incorrect information.

Oil and gas consultancy companies can offer investors a unique and thorough understanding of this business by identifying important oil and gas engineering, land (geology, etc), legal or financial needs. The cost of such training varies depending on the extent and breadth of the subject matter.  In addition to training, oil and gas investment consultancy companies offer important services that allow the investor to make informed decisions.

For example, they frequently have vast experience in determining the value of oil and gas properties. Such valuation is made through a complex engineering, geological and geophysical study of a piece of land.  In addition, they assist in the preparation and negotiation of agreements made between landowners and subsurface rights-buyers, which may include clauses about warranties, assumption of liabilities, environmental issues, purchase prices, operational details and closing documents. Finally, they can assist in revenue and expense accounting audits, a very important factor to keep investors apprised of the oil investment‘s cashflow and other financial measures.

There are different kinds of contracts made between landowners and the buyer-operators hired by oil investors to develop an oil field. Sometimes, the landowner and operator make an agreement based upon the costs of oil production. Such an agreement takes into account estimates of the costs of drilling and other production operations, such as electricity and labor.  This kind of oil and gas business arrangement is called a “working interest.” The operator can be a company, an individual or sometimes a foundation, and is responsible for the exploration and production of an oil and/or natural gas well or group of wells. Sometimes, the operator handles all the costs of production and provides the landowner and investors with a fixed income agreed upon in advance. These kinds of contracts are called a “royalty interest.” Among other benefits, it removes the uncertainty and risk related to the operational activities of oil production, but they usually provide a lower ROI.

Oil and gas investment consultancy companies can help oil investors make agreements with landowner under favorable conditions. On the other hand, those companies also provide assistance to individual owners; this can make it challenging to ensure a lucrative oil investment is developed. The landowners are the ones who own tangible property that is usually passed down from generation to generation. When individual owners do not have time to deal with important assets, they may also refer to the consultancy companies for advice and management. Many of them, however, take charge of the management and security of their properties, they know what’s on the land and under the ground, and they aren’t easily fooled.